Board Monitor Canada 2021 - Heidrick & Struggles
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CEO & Board Practice Board Monitor Canada 2021 A look at new directors on TSX 60 boards suggests that boards would benefit from seeking a new balance between directors who meet traditional expectations and those who meet fast- changing stakeholder demands.
About Board Monitor This report is part of Heidrick & Struggles’ long-standing study of trends in board composition in countries around the world. Produced by our CEO & Board Practice, these reports track and analyze trends in non- executive director appointments to the boards of the largest companies in Australia, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Mexico, the Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, the United Arab Emirates, the United Kingdom, and the United States. Information about executives is gathered from publicly available sources, BoardEx, and a Heidrick & Struggles proprietary database. Thanks to the following Heidrick & Struggles colleague for her contributions to this report: Nancie Lataille Laryssa Topolnytsky Toronto Toronto
Heidrick & Struggles
Welcome to 4 Boards seek fresh
perspectives in 2020, but
Board Monitor still have some way to go
Canada 2021
5 Snapshot of
2020 findings
6 Looking
ahead
3
Board Monitor Canada 2021
Boards seek fresh
perspectives in
2020, but still have
some way to go
Board fundamentals—financial oversight The share of seats going to people with Canadian boards often seek to avoid
and good governance—were crucial in CEO experience swings fairly widely each conflicts of interest by adding new
2020 as companies navigated through a year. However, the share going to people directors with experience in the board’s
global pandemic, geopolitical uncertainties, with CFO experience has dropped steadily industry, but from other countries.
and economic recovery. Many directors over the past three years, from 27% to Just over a third of TSX 60 seats in
found themselves working more closely 24% to 19%. The share of seats going to 2020 were filled by people from other
than ever with executive teams to keep people with prior board experience has countries—80% of those from the United
their companies afloat, and working at a dropped, too, from 90% two years ago to States. In addition, 53% of seats went to
faster pace than ever before. And boards 71% in 2020. (In the United States, the people with international experience,
were increasingly expected to not only share was 62%, a five-year low.) much higher than Europe’s 41%.
address topics as wide-ranging as
Forty-one percent of seats on TSX 60 There was a marked drop in the share of
community responsibility, sustainability,
boards went to active, rather than retired, seats filled by women on TSX 60 boards in
and diversity in their own composition, but
executives, notably lower than the 57% 2020: 38% compared with 52% the prior
to do so publicly. Furthermore, remote
in the United States, and steady across year, after 32% in 2018. We saw a drop in
working and crisis management forced
the three years of our study. Finding the share of seats going to women in the
boards to operate differently—often
right balance of active and retired United States last year as well, though it
outside their traditional schedule and
directors can be difficult for many was less stark—44% in 2019 to 41% in
agenda.
boards. The benefits of current executive 2020.
All of this, of course, affected how boards
experience are increasingly important in
thought about the new members they added
an ever-faster-moving environment, yet
in 2020. In Canada, boards of the TSX 60
active executives also create uncertainty
filled 68 seats, a notable rise from the 50
for boards in that they may face more
seats filled the prior year and slightly higher There was a marked drop in the
conflicts of interest than retired board
than the 63 seats filled in 2018. Fifty-three
members, may change jobs, and may share of seats filled by women
percent of those seats were filled by people
have less time to devote to board work. on TSX 60 boards in 2020: 38%
with experience as a CEO or CFO, just about
the same as the United States’ 51%. compared with 52% the prior year.
4
Heidrick & Struggles
Snapshot of 2020 findings
New director Current and Current and
68
seats filled former CEOs former CFOs
41% 19%
60
Average age
Active/retired executives (%) Distribution of previous industry experience, by industry (%)
Active: 41 Retired: 59 Business services Consumer Financial services
Industrial Life sciences Technology Other
Consumer 17 28 28 6 11 11
Experience (%)
71 Previous board Financial
15 19 56 4 7
services
53 Financial risk/compliance
Industrial 20 3 20 40 6 11
53 International
Technology 13 9 39 4 26 9
13 Digital or social media
Note: Numbers may not sum to 100%, because of rounding.
6 Cybersecurity
Gender (%) Nationality (%)
3 Sustainability
3 Diversity and inclusion
Male Female Non-national National
62 38 37 63
5
Board Monitor Canada 2021
Looking
ahead
Canadian boards’ commitment to their own directors highlight the importance of
effectiveness is lasting. We expect boards Canadian boards broadening the pool
to intensify their focus on their role in of potential directors significantly and
supporting their organization’s purpose and looking beyond traditional requirements
culture, including a continued commitment for CEO or CFO experience or prior public
to having the right people on the board. We board service. Boards will also benefit
see boards innovating their refreshment from seeking out other types of diversity,
processes, now including fundamentals including other racial or ethnic minorities,
such as assessing the purpose, size, and differently abled people, and LGBTQI+
refreshment rate, as well as the people. Overall, the data show that these
composition of backgrounds and expertise trends are heading in the right direction, but
that will be most effective.1 directors underscore that making lasting
progress will require that diversity remain
In Canada, conversations with several an ongoing topic for the board and the
directors and our own experience highlight executive team, not just a “one and done”
three areas most boards would benefit from effort. Boards will also need to shift their
focusing on: increasing diversity of all mindset from one of checking a box—X
kinds; finding a new balance between number of women, X number of people from
traditional and newer areas of expertise; different provinces, X number of people
and ensuring first-time directors are with digital expertise, for example—to a
effective. mindset of building the right mosaic to most We believe it’s crucial that boards
effectively support the company. Indeed, we
Increasing diversity of all kinds believe it’s crucial that boards do not make
do not make tradeoffs in diversity
The annual variability of the share of tradeoffs in diversity to meet individual to meet individual goals, but
seats going to women in Canada and the goals, but instead focus on the whole.2 instead focus on the whole.
lack of real progress in adding BIPOC
1 For more on new approaches to board refreshment, see Alice Breeden,
2 For our discussion of this point in the US context, see
Theodore Dysatt, and David Hui, "Building the foundation for better
Board Monitor US 2021, Heidrick & Struggles, on heidrick.com.
board refreshment,” Heidrick & Struggles, on heidrick.com.
6
Heidrick & Struggles
Finding a new balance conversations with individual directors
about their contributions and those of
Building the right mosaic of perspectives
the rest of the board. When all directors
and skills most effectively starts with
believe that such conversations are held
leadership champions, often the board
transparently and in good faith, it reduces
chair or the chair of the nominating and
surprises and bitterness should one or
governance committee, along with a review
more directors be asked to leave earlier
of the current board’s effectiveness. Such
than they might have expected. Another
reviews typically start with the board’s
option, of course, is to increase board
purpose—something many revisited over
size to include fresh perspectives; but
the past 18 months—their composition,
their dynamics, and their processes.3 boards can easily get too big to function
effectively and so making a decision to
All boards need a mix of traditional add seats is one boards don’t take lightly.
expertise—a strong chair, a knowledgeable
audit chair, and an effective compensation Ensuring first-time
committee chair—along with a mix directors are effective
of other skillsets and backgrounds
that is determined by the company’s As boards shift their balance and continue
particular situation. In addition to effective succession planning, they will
gender and racial or ethnic diversity, certainly add more first-time directors.
directors with nontraditional industry, Some current directors note that it’s
functional, or regional experience can important for their new peers to have
all bring in new perspectives that are enough broad business expertise that
increasingly important to help companies they can contribute on all topics, not only
maintain agility in continuously one specific area such as cybersecurity
uncertain conditions. Adding more active risk or digital marketing. In the long
executives—a category where Canada’s run, they say, nonexecutive directors
boards lag most other countries’—is should all have the ability to chair a
an important way of adding operational committee (whether they do or not) to
expertise in a company’s own industry or help bolster the board’s independence.
others. Finally, most boards still find that The processes and dynamics related to
including a current or recently retired CEO, first-time directors are also crucial. Part
particularly to serve as a sounding board of that responsibility sits with chairs
to the sitting CEO, is helpful. However, to ensure those first-time directors are
more and more boards are finding that onboarded effectively, that those without
senior executive experience beyond other deep knowledge of the company or its
CEOs or CFOs can be equally valuable. industry receive it, and that the meeting
As boards seek to shift their balance, dynamics are inclusive so that everyone
directors stress the importance of open is able to speak up. When adding new
conversations, particularly about individual directors that contribute to a board’s
director performance and expectations of diversity, chairs must also assess how
length of service, given the current strategy ready the board is adapt to the fresh
and stakeholder expectations. On some perspectives those individuals will bring,
boards, directors still expect to serve as and should put in place a plan to evolve
long as possible, whether there are term the board culture to include them. First-
limits or not. Other boards are benefiting time directors themselves will also do well
from setting an expectation that every to take a few specific steps to find their
director’s performance will be reviewed voice, including building relationships
either annually or at the end of their term and finding a mentor on the board.4
and that renomination is not a given.
We expect the directors added this
Chairs have the crucial role to play here, year, all in all, to be part of boards
both through formal board and director that are more diverse, more effective,
effectiveness reviews and through and more agile than ever.
3 Alice Breeden and David Hui, “A board review that accelerates 4 Alice Breeden and Richard Jolly, “Three steps to finding a voice
competitiveness,” Heidrick & Struggles, on heidrick.com. in the boardroom,” Heidrick & Struggles, on heidrick.com.
7So you want to join a board…
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